Some Reflections on Insurance Guarantee Schemes Compatibility with EU’s Constitutional Protections of Business and Property
Abstract
The EU Commission’s ongoing review of the Solvency II Directive includes a proposal for the introduction of EU harmonized insurance guarantee schemes (IGSs). Such a scheme is motivated by increasing consumer protection for policyholders, in addition to the already high level of consumer protection the Solvency II regime entail. IGSs are supposed to provide last-resort protection to policyholders. The compensation according to IGSs shall be made with mandatory support for financing of the schemes from unrelated and competing insurance companies. A compulsion to participate in IGSs means that the insurer is legally restricted in the right to decide how its own funds are to be used in the business, corresponding to the amount set aside for an external purpose which it has not chosen and has no control over. These restrictions for insurers have constitutional implications under the EU Charter and the ECHR, that is, the protection therein of the freedom to conduct business and the right to property. To comply with these constitutional rights, the EU’s institutions may legislate as it deems necessary if such legislation meets certain essential prerequisites. In order to assess this, a thorough analysis is required other than, like the Commission, merely claiming that an IGS is not expected to have a direct impact on fundamental rights.
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